China in crypto: it remains a fascinating combination of strict bans and strategic innovation.

China in crypto: it remains a fascinating combination of strict bans and strategic innovation.

Financial Put-it-on Blog | China bans cryptocurrency trading but embraces blockchain – Analysis by our Put-it-on Asia Reporter

By our Put-it-on Asia Reporter

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China in crypto: it remains a fascinating combination of strict prohibitions and strategic innovation. Since 2021, crypto trading in China has been completely banned, but at the same time, Beijing is heavily investing in blockchain technology, tokenization of Real World Assets (RWAs), and the development of its own digital currency, the e-CNY.

In this Financial Put-it-on Blog, we dive deep into the Chinese crypto strategy, the role of the central bank, the resurgence of bitcoin mining, and the geopolitical implications for investors.

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🚫 China bans crypto trading: financial security above all

The People's Bank of China (PBOC) classifies trading in virtual currencies as illegal financial activity. This applies to:

According to academics from the China Europe International Business School (CEIBS), there are three key reasons for the ban:

The Chinese government does not tolerate payment systems over which it has no control. Decentralized cryptocurrencies do not fit into that model.

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From global crypto power to zero tolerance

Remarkably, China was for years the center of the global crypto industry.

Due to low energy prices, China was the hotspot for bitcoin mining. But that era ended abruptly in 2021.

However, figures from Hashrate Index (2025) show that China is now responsible for approximately 14% of the global bitcoin hashrate — placing it in third place worldwide. Officially banned, but still present in practice.

⚠️ Why crypto got a bad reputation in China

The Chinese government sees crypto as risky because of:

The fear that consumers would invest their savings en masse in volatile crypto investments was a major driving force behind the total ban.

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🇭🇰 Hong Kong as a crypto-testing ground

Interestingly, crypto is banned on the Chinese mainland, but Hong Kong is given a space for experimentation.

The city is prominently positioning itself as a crypto hub and is organizing events like Bitcoin Asia. During such a conference, Eric Trump even praised Hong Kong as a future crypto powerhouse.

Hong Kong actually functions as a testing ground for blockchain innovation, while Beijing maintains control.

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🔗 Blockchain yes, crypto no: Tokenization of RWA’s

Although cryptocurrency trading is prohibited, China does see potential in the underlying technology.

The PBOC recently published a legal framework for tokenization of Real World Assets (RWAs). This means:

For Chinese entrepreneurs, this could become an alternative to an IPO. For investors, it offers access to fractionalized investments.

Condition: strict supervision and total state control.

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💴 The e-CNY: China’s digital yuan

While private crypto remains banned, China is developing its own digital currency: the e-CNY.

The e-CNY:

Since 2014, the digital yuan has been under development. However, adoption remains limited: only about 0.2% of the total digital transaction volume.

In China, payment systems are mainly dominated by:

The e-CNY is intended to curb their power and give the state more control over payment transactions.

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🎯 Strategic control through digitization

The digital yuan provides the government with unprecedented policy tools:

This is in stark contrast to the original ideal of bitcoin: decentralization without a central authority.

China clearly opts for digital control over digital freedom.

🧊 Crypto in the shadows: cold wallets and zero tolerance

Despite the ban, trading is still being conducted in secret.

The government is taking a tough stance. The state broadcaster CCTV recently aired a documentary about the alleged corruption case involving Yao Qian, a former official at the regulatory agency.

According to the authorities, he stored crypto in so-called 'cold wallets' in his desk drawer and used digital assets for illegal real estate transactions.

With public confessions, Beijing underscores its zero-tolerance policy against unauthorized financial activities.

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What does this mean for investors?

From a Put-it-on perspective, we see three clear trends:

China continues to stimulate blockchain

Tokenization and digital infrastructure are given space - as long as the state maintains control.

Private crypto remains politically unacceptable

Bitcoin and stablecoins pose a threat to monetary sovereignty.

The digital yuan is a geopolitical instrument.

The e-CNY may have international impact on trade and capital flows in the long term.

📌 Conclusion | Financial Put-it-on Analysis

China bans crypto, but at the same time builds a controlled digital financial ecosystem.

Where bitcoin represents decentralization, China represents digital state power.

For investors, this means:

The big question is not whether China allows crypto.
The real question is: what does a fully state-controlled blockchain economy look like?

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